Thursday, May 9, 2013

China's Online Video market consolidates

China is an Internet outlier - particularly when it comes to who dominates online service categories.  Between the limits the state imposes on foreign firms, and language and cultural differences, the top online services in China are predominantly native firms - Baidu in search, Alibaba in e-commerce, Qzone and Weibo in social media.  As for online video, some firms are moving to consolidate what had been a fragmented market.

Last year, two of the larger video streaming sites in China merged, forming Youku-Todou.  Baidu, already China's dominant search engine, bought out its original partner for its video streaming service iQiyi, and recently announced its acquisition of video streaming service  The moves created two claimants for the title of China's largest video platform (depending on how its measured).

Online video is huge in China, in part due to the scarcity of entertainment programs on state-operated TV.  Chinese online video users watch billions of videos monthly.  Video and search are the most popular online services in China, handily topping social media.  And revenues from online video is booming, with analysts predicting a five-fold increase from 2011 to 2016, mostly from advertising.
  Having a dominant position is important for advertising-supported media - dominant firms historically get an even higher share of total advertising revenues, while close competitors don't do as well (some advertisers don't want to buy both).  Some analysts argue that the future of online video in China will be in mobile, with video ads on mobile being the most effective, and most highly valued, segment of the online advertising market.  Youku Tudou claims 150 million daily mobile users for its online video content, and Baidu claimed 200 million monthly users for its iQiyi streaming service - and that was before its acquisition of  (Note the difference metrics - daily vs. at least once a month).  That's out of 564 million Internet users, according to the latest Chinese government report.

Adding certainly puts Baidu in a better, more competitive position - but it's the content that ultimately drives online video use.  And the reports don't mention what this means in terms of content.  That makes it difficult to evaluate which, if either, will eventually dominate the Chinese online video market.

Sources -  Video streaming is China's big prize, and Baidu just edged closer to claiming it,  Quartz
Baidu Acquires PPS for $370 Million, Claims It's Now China's Biggest Video Platform,  TechinAsia

Edited - Fix typo in header, 13/5/2013

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